Heineken hints at appetite for non-core European disposals in FY 2012 results call

Heineken has no plans to enter a mainstream Chinese beer market characterized by too low margins

Heineken said today it is reviewing its non-core European businesses that don’t focus fully on beer, and asking whether its ownership of such assets makes strategic sense.

Announcing its Q4 and FY 2012 results for the year ending December 31 today, Heineken reported a full-year revenue of €18.383bn ($24.797bn) and net profit of €1.43bn.

CEO and chair Jean-François van Boxmeer said that taking full control of Asia Pacific Breweries had significantly expanded Heineken’s exposure to growth markets.

Meanwhile, the Heineken brand has returned to growth in the US, while Dos Equis lager (part of the firm’s Mexican portfolio) grew an impressive 25% during the year.

Proactive disposal stance?

During a later investor call this morning, analyst Ian Shackleton from Nomura Securities noted “a slightly more proactive stance in relation to disposals”, given recent Heineken announcements such as the Hartwall strategic review in Finland.

Did the Dutch brewer have a strategy in this respect going forward, Shackleton asked, or were such instances simply one-off reviews?

“We don’t have many businesses that are not really core,” van Boxmeer said. “We have to assess whether a business that is not totally focused on beer is strategic for the market in which we operate, whether the market is strategic, and then make a call.”

“So you don’t have to see it as a very broad strategic review. But in Europe, where the market is highly competitive, we are reviewing these kind of positions in that light” he added.

Pursuing Chinese premium

Heineken says it has no plans to enter a mainstream Chinese beer market characterized by low margins, but will instead follow the premium blueprint it has laid down in the US.

Analyst Andrew Holland from Société Generale asked management whether there were any circumstances in which Heineken would consider entering the mainstream market in China.

Van Boxmeer replied: “The answer is plain ‘No’. In China we concentrate on the premium end of the market like we do in the US.

The company had done this so far with Heineken but also Tiger, van Boxmeer said, and would concentrate on developing a similar approach to the one it follows in the US.

“You know our low appetite for the mainstream market in China: structural overcapacity, very low prices – margins are tendentially improving but margins are very very low.

“We have been divesting all our joint ventures in the mainstream market lately and concentrating on what we call ‘second leadership’, and we don’t intend to change course.”

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